Oracle 2006 Annual Report Download - page 98

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2007
The following table presents the effect on reported net income and earnings per share if we had accounted for
our stock options under the fair value method of accounting for fiscal 2006 and 2005:
Year Ended May 31,
(in millions, except for per share data) 2006 2005
Net income, as reported $ 3,381 $ 2,886
Add: Stock-based employee compensation expense included in net income,
net of related tax effects 39 70
Deduct: Stock-based employee compensation expense determined under the fair
value method, net of related tax effects (158) (205)
Pro forma net income $ 3,262 $ 2,751
Earnings per share:
Basic—as reported $ 0.65 $ 0.56
Basic—pro forma $ 0.63 $ 0.54
Diluted—as reported $ 0.64 $ 0.55
Diluted—pro forma $ 0.62 $ 0.52
Stock Option Plans
In fiscal 2001, we adopted the 2000 Long-Term Equity Incentive Plan (the 2000 Plan), which replaced the
1991 Long-Term Equity Incentive Plan (the 1991 Plan) and provides for the issuance of non-qualified stock
options and incentive stock options, as well as stock purchase rights, stock appreciation rights and long-term
performance awards to our eligible employees, officers, directors who are also employees or consultants,
independent consultants and advisers. In fiscal 2005, the 2000 Plan was amended and restated to, among other
things, eliminate the ability to reprice options without stockholder approval, to provide the Board of Directors
(Board) with the ability to grant restricted stock awards, to permit us to grant performance-based equity
awards for eligible tax deductibility, to provide the Board with the ability to issue transferable equity awards
and to eliminate the ability to buyout employees’ options with cash or common stock. Under the terms of the
2000 Plan, options to purchase common stock generally are granted at not less than fair market value, become
exercisable as established by the Board (generally over four years under our current practice), and generally
expire no more than ten years from the date of grant. Options granted under the 1991 Plan were granted on
similar terms. If options outstanding under the 1991 Plan are forfeited, repurchased, or otherwise terminate
without the issuance of stock, the shares underlying such options will also become available for future awards
under the 2000 Plan. As of May 31, 2007, options to purchase 353 million shares of common stock were
outstanding under both plans, of which 229 million were vested. Approximately 346 million shares of
common stock are available for future awards under the 2000 Plan. To date, we have not issued any stock
purchase rights, stock appreciation rights, restricted stock awards or long-term performance awards under this
plan.
In fiscal 1993, the Board adopted the 1993 Directors’ Stock Option Plan (the Original Directors’ Plan), which
provided for the issuance of non-qualified stock options to non-employee directors. In fiscal 2004, the
Original Directors’ Plan was amended and restated to eliminate a term limit on the plan, eliminate the ability
to reprice options without stockholder approval, decrease the number of shares of common stock reserved for
issuance under the Original Directors’ Plan, provide the Board with the ability to make grants of restricted
stock, restricted stock units or other stock-based awards instead of the automatic option grants and rename the
Original Directors’ Plan, the 1993 Directors’ Stock Plan. In fiscal 2007, the Original Directors’ Plan was
further amended to, among other things, increase the amounts of the annual stock option grants to directors,
permit pro rata option grants to chairs of Board of Directors’ committees and to provide that the Board of
Directors or the Compensation Committee may, in the future, change the option grant policy for
non-employee directors (the Directors’ Plan) Under the terms of the Directors’ Plan, options to purchase
8 million shares of common stock were reserved for issuance, options are
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Source: ORACLE CORP, 10-K, June 29, 2007 Powered by Morningstar® Document Research℠